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What is boogle worth today when it has no leverage

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Question: Boogle is back and has no debt! Boogle has an equity Beta of 1.6, with market expected return of 10% and a risk free rate of 3%. Boogle's cash flows are expected to be 80 million next year and will grow at 3% per year. Boogle has 3 million shares outstanding.

If Boogle wants to add debt and maintain an interest coverage ratio of 10%, where corporate taxes are 40% and the cost of debt capital will be 5%.

A) What is Boogle worth today, when it has no leverage?

B) What will be Boogle's value if you add leverage and maintain an interest coverage ratio of 10%?

C) How many shares will be repurchased in this transaction?

Reference no: EM131948324

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